What is npv for all three buildings

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The Sweet Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Sweet has decided to locate a new factory in the Panama City area. Sweet will either buy or lease a site depending upon which is more advantageous. The site location committee has narrowed down the available sites to the following three very similar buildings that will meet their needs.

Building A: Purchase for a cash price of $619,800, useful life 26 years.

Building B: Lease for 26 years with annual lease payments of $71,730 being made at the beginning of the year.

Building C: Purchase for $650,100 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a net annual rental of $6,810. Rental payments will be received at the end of each year. The Sweet Inc. has no aversion to being a landlord.

In which building would you recommend that The Sweet Inc. locate, assuming a 11% cost of funds? What is NPV for all three buildings?

Reference no: EM131262762

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